A Glance at the Evolution of Health Insurance in India

Health insurance is a relatively new concept for India. It made its debut in 1986 when health insurance policy was first launched in India, and since then a lot of things have changed – not just in the sector of health insurance but also in our country both economically and demographically. Since1986, the sector has grown rapidly and currently more than a dozen companies are active in this sector with quite a few foreign players working in collaboration with Indian partners. In its short existence, healthcare insurance has enabled people to get better treatments without having to worry about the costs, and in this article, we take a journey back in time to understand the evolution of healthcare insurance in India.

How and when it came to India?

Before general health insurance came to India, only the central government employees and private sector employees had the luxury of being covered by something similar to health insurance. Central government provided health insurance to its workers under Central Government Health Insurance Scheme (CGHIS), while private sector employees had the option of Employee State Insurance Scheme (ESIS).

Like any new beginning, health insurance in India also had humble beginning. It was launched by Government of India as Mediclaim, and the coverage amount ranged from INR 15,000 to INR 5,00,000. However, health insurance or Mediclaim being a new concept, it didn’t catch the interest of buyers at once. As a result, growth was relatively slow for the first 4-5 years.

In 1991, Mediclaim policy when through first major revision, which resulted in removal of the quantitative sub-limits from the policy, along with other changes which were based on the feedback received from customers. As a result, the policy became more beneficial and hence attractive for prospective customers. Overtime, in addition to individual Mediclaim policies, health insurance companies started providing group Mediclaim policies. In 2001, there was a major change when the concept of Third-Party Administrators (TPA) was introduced to the market.

The TPAs were kept under the oversight of Insurance Regulatory and Development Authority (IRDA), and were authorized to sell health insurance policies, thus increasing the number of people selling healthcare policies. TPAs enabled health insurance providers in the process of claim settlement. This left healthcare companies without the worry of bearing the costs of claim settlement, while TPAs exploited the efficiencies of scale by working with multiple number of health insurance providers at the same time.

The year 2007- when the sub-limits were brought back

In the year 2007, sub-limits were brought back to the insurance system to prevent mis use of health insurance policy by policy holders. The removal of sub limits resulted in a massive increase in the number of claims as the absence of sub-limits allowed the policyholders to choose certain healthcare services in a reckless way. For example, most of the hospitals have different types of rooms for hospitalization purpose with different charges. In the absence of a limit on the room cover amount, policyholders chose the most expensive option available. As a result, the insurers were incurring losses in many ways. As a result, sub-limits were brought back by health insurance companies and were made part of health insurance agreement. These changes were also applicable on a number of pre-existing diseases at the time, and insurance companies took care to clarify the same in their policy papers.

The present status of health insurance in India

In spite of the rapid growth, owing to the large population of India, it is also a fact that a big chunk of India’s population is still unaware of the benefits of health insurance. The ignorance about this facility and its benefits is more pronounced in rural areas, thus leading to Out of pocket expenditure contributing around 80% of all health care spending in India.

However, as internet’s reach has improved so has the awareness of these products among the masses. Now health insurance policies can be easily booked online after doing a thorough research from within the comfort of their homes. In this regard, we at HDFC Ergo, have also created a world class product for desktops and mobile phones to enable our users to understand our offerings better and make the right decision.

In the present time, the minimum sum assured you can expect from any public health insurance company is INR 50,000. In the case of private companies, you can easily get a minimum sum insured of INR 1 lac. Things are even better when you buy these policies online. Majority of the online health insurance policies available these days offer at least INR 3 lacs as the minimum sum assured. This is why it is better to purchase health insurance policies online.

Why you must buy a health insurance policy?

It is known to everyone that healthcare and medical services have become too costly these days. In the coming years, these services are going to get even more expensive. When it comes to availing healthcare services, most of us prefer private hospitals and nursing homes. For a middle-class family, it can be quite difficult to deal with these expenses. Therefore, having a policy can provide you with much-needed financial protection in such situations. You can also get your entire family covered under the same policy. You can choose a higher sum insured amount by paying a higher premium. So, compare the list of health insurance policies online, and go for the one that best suits your requirements.

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About the Author: Clare Louise